Is your nonprofit financially resilient? Take a Nonprofit Financial Plan X-ray.

While assessing true resilience requires a deep dive into an organization’s financials, program operations and administrative policies and procedures, there are a few factors that your organization can drlll down into a nonprofit financial plan to get an initial indication of financial resilience in the face of uncertainty. Fairlight’s Nonprofit Financial Plan probes the following areas.

1. Organization’s immediate strategic focus

2. Stability of revenue

3. Number of months of reserves

4. Timing, liquidity and risk profile of funds on hand

5. Plans for an endowment and the size

A nonprofit that has sound financial plans for the above factors deliver more impact, are better prepared for the unexpected and can grow and innovate. Study the following nonprofit profiles to determine whether your nonprofit is resilient.

Your Nonprofit is Robust

Your organization is managing day-to-day finances effectively and is currently focused capacity building to bring the nonprofit to the next level of operational maturity by scaling operations for more impact.

Monthly revenue typically outpaces expenses as there is a growing interest your mission from a development perspective. The nonprofit has with at least twelve months of emergency or reserve funds that is easily accessible. The organization has invested financial resources to the most appropriate vehicle, based on time horizon, liquidity and risk to ensure the organization’s initiatives are appropriately funded. The organization has a moderately-sized endowment or board-advised fund in place with the proper policies established to ensure investment and liquidity guidelines are followed.

If this is your organization…

1. Ensure you review your policies against reality at least once per year. To learn about the importance of an Investment Policy Statement, review What’s an Investment Policy Statement and Why Your Nonprofit Needs One.

2. Schedule an outside assessment of your liquidity and investment programs at least once every three years. For more information on choosing an advisor to review your current investments, review How to Choose an Advisor for Your Nonprofit Board Fund or Endowment.

3. To keep your nonprofit board and leadership up to date on how your nonprofit funds are affected by the economic landscape, subscribe to Fairlight’s monthly nonprofit economic snapshot below.

Your Nonprofit is Emerging

You’re in start-up mode. Your organization is managing day-to-day finances effectively and is expanding rapidly and innovating to grow and build out programs.

Monthly revenue is volatile as the organization’s giving and earned revenue is unpredictable and not yet on a consistent cycle. The nonprofit has at least six months of emergency or reserve funds that is easily accessible. The organization is exploring launching an endowment or board-advised fund in the next year or so.

If this is your organization…

1. Optimize your funds based on the time horizon of your projects, needed liquidity and the risk profile of the organization’s strategic plan. To understand cash optimization, review Three Questions to Optimize Nonprofit Cash Reserves.

2. Decide whether launching an endowment is right for your organization by reviewing, Nonprofit Endowments 101: What Are They and What It Takes to Maintain One and Start-up Endowment: Is Your Nonprofit Ready?

3. To keep your nonprofit board and leadership up to date on how your nonprofit funds are affected by the economic landscape, subscribe to Fairlight’s monthly nonprofit economic snapshot.

Your Nonprofit is Surviving

Your organization’s revenues match expenses more often than not but has limited emergency funds for the unexpected. Holding only three months of reserves is the absolute bare minimum and is not sufficient for protracted emergencies, particularly if your organization’s revenues and expenses are hard to predict every month. While the nonprofit is managing to steady-state, growth is elusive until either gifts or earned revenue can be accumulated to fund the future. This may require a new strategic path toward survival.

If this is your organization…

Learn about how reserves are critical to your nonprofit’s survival and what amount is right for your organization by reviewing Why Nonprofits Need a Reserve and Risk Management.

Understand how board risk culture and the perception of risk are critical to achieving organizational resilience Jet Skis and the Perception of Risk.

Your Nonprofit is Fragile

Your organization is in survival mode with limited emergency funds. Holding only three months of reserves is the absolute bare minimum and is not sufficient for protracted emergencies, particularly if your organization’s revenues and expenses are hard to predict every month. The organization has one funding source that is difficult to rely on. Leadership and the board need to come together to agree on a new  path forward.

If this is your organization…

1. Learn about how reserves are critical to your nonprofit’s survival and what amount is right for your organization by reviewing Why Nonprofits Need a Reserve and Risk Management.

2. Understand how board risk culture and the perception of risk are critical to achieving organizational resilience Jet Skis and the Perception of Risk.

Want X-Ray Vision? Take Fairlight’s Resilience Assessment to see whether your nonprofit is financially resilient.

Talk to the financial experts at Fairlight Advisors to learn more about managing your nonprofit’s investments. Schedule a free consultation today!